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Youth Unemployment is a major economic and political issue. We hear a lot about ‘a lost generation’ of young people;about how we are failing a whole generation of young people who cannot find work. Politicians, of all persuasions, economists, journalists and often parents, as well as young people themselves, talk about the ‘scourge’ of youth unemployment. And a great deal of public policy attention (and substantial resources) is devoted to tackling the problem.

But just how big a problem is it really? I am a heretic on this issue! My view is that youth unemployment is seriously overestimated,misreported and misinterpreted. This has major consequences for public policy,resource allocation,political and policy priorities and public expenditure. If we ‘big up’ the problem then it will be seen as relatively more important than it actually is and, critically,the situation facing other groups experiencing unemployment will seem relatively less important than they should be in reality eg prime age unemployment; older workers unemployment; long term unemployment; single parents; ethnic minorities; geographical areas and so on. If we get the size and extent of the problem wrong,we fall at the first hurdle of policy making. And if our diagnosis is faulty then so will be our treatment. So,this is much more than a numbers game.It is really serious.

The official overall UK unemployment rate is currently 7.4% or 2.39 million (as measured through the Labour Force Survey using the official ILO definition). The youth (ie aged 16-24) unemployment rate (using the same measure and definition) is 20.5% or 940,000. This is where the widely accepted, popular discourse on youth unemployment comes from. But does this mean that 20% of young people,1 in 5 of young people, are unemployed? NO,it does not. What is actually being measured here isthe proportion of ‘economically active’ young people who are unemployed ie the proportion of those who are actively seeking work. The number of economically active young people is the denominator,NOT the overall number of young people. The numerator is the number unemployed. This latter number is also usually misunderstood,as we shall see.

Economic activity among young people is relatively low because so many are in full time education. Of the 7.7 million young people in the UK,only 4.5 million are economically active. 3.2 million are inactive,with 2.9 million in full time education and the remainder looking after home/family or unable to work. So,the proportion of young people who are unemployed is not 20.5% but 12.2% ( i.e.940,000 divided by 7.7 million and NOT 4.5 million).Nearly 40% less. This figure can be referred to as the ‘youth unemployment ratio’.This is, of course, still far too high:1 in 8 young people are unemployed. It is a waste of talent,a denial of opportunity and often a personal tragedy. But in aggregate,it is significantly less of a problem than it being 1 in 5 young people.

But that is not the end of the story.Why? Because it is possible to be in full time education AND be unemployed. Students who are looking for work,usually part time work in vacations as well as during term time, and do not succeed in doing so are counted as unemployed. This I think is not unemployment as commonly understood and is categorically different from those unemployed young people who are not in education: they are unemployed,period. Some 300,000 of the 940,000 young unemployed are actually in full time education. If these are excluded from the data,then youth unemployment becomes around 640,000 and 8.3% of young people. This is still a serious problem of course…..but the unemployment figureis now not very different to the overall national average unemployment of 7.4%. The youth unemployment ‘problem’ has now taken on a rather different character.

There is yet more however to the youth unemployment story.Over time,an increasing proportion of young people have remained in full time education. Participation in higher education has increased nearly 5 fold in the last 40 years and did so especially quickly in the 1990s. Staying on rates at school have increased, more have gone on from school to college and,from next year the compulsory ‘schooling’ leaving age will rise to 17 and then 18. Over the period 1992-2010 participation of 16-17 year olds in full time education increased from 60% to 82% and for 18-24 year olds from 16% to 32%.These substantial and highly desirable trends have serious consequences for the measured extent of unemployment,as we first encountered it at the start of this blog. Why? Because this trend of increasing educational participation means ongoing reductions in youth economic activity (and thus increases in economic inactivity) and hence our denominator (the numbers economically active) shrinks over time. So,even if the numbers of youth unemployed remain the same (or even decrease) the youth unemployment rate will, all else being equal, increase over time. Thus the consequence of many more highly educated young people is an increase in youth unemployment.….as measured by the headline ‘1 in 5’ data! This is clearly nonsense, exposes the limitations of the official youth unemployment data/reporting and should severely curtail it’s use in policy and practice. Regrettably,this has not been the case so far.

Actually the effect of these increases in the proportion of young people ‘staying on’ in education adds yet a further twist to youth unemployment. Because qualifications are closely correlated with employability (the headline youth unemployment rate for those with level 3 is around 8% while that for those without any qualifications it is 33%), and because the youth ‘left behind’ to engage in economic activity will on average necessarily have diminishing qualification levels,this too will tend to raise youth unemployment levels as conventionally measured.

For the sake of completeness,there are 2 other important things to say about measuring the extent of youth unemployment.

Firstly,there is one other measure of youth unemployment: The ‘JSA’, or claimant count,which counts the number of Job Seekers Allowance claimants on a monthly basis (The ILO/LFS measure is survey based). This currently stands at around 320,000 or 4.2% of young people (the overall figure is around 4% or 1.35 million). It is however limited by claimant eligibility criteria and their change over time. It is none the less interesting to note that in the mid 1980s this ‘claimant count’ for young people regularly topped 1 million.

Secondly,the actual numbers and % of young people unemployed,however measured,provides an incomplete picture of the issue. It is not just whether a person is unemployed that matters,but for how long they are unemployed: the ‘duration’ of unemployment.It is one thing to be out of work for a few weeks,quite another to have no work for a year or more. Long term unemployment (12 months or more) among young people is 27% i.e. just over a quarter of the youth unemployed (around 260,000) have been out of work continuously for a year or more. This is a dreadful situation and one which has more than doubled in scale over the last 6 years. However,long term unemployment among adults (aged 25-64) affects 41% of the unemployed (around 620,000), and has also more than doubled in the last 6 years. Long term unemployment then is an even more serious problem for adults than youth.

There is an alternative measure of youth unemployment which tackles several (though not all) of the issues covered above,without the need for the substantial reworking of the data that I have proposed and advocate, both nationally and locally. It also has the benefit of being comparable between countries. The ‘youth unemployment ratio’ measures the proportion of young people (rather than the economically active) who are unemployed. Using this ratio for the European Union as a whole (EU 28 countries) for 2012,with thanks to Eurostat for a neatly compiled and presented graphic adding the age dimension, we can see in the chart below that youth unemployment,whilst still a serious challenge,appears far less daunting than often thought.We can also see the major influence of schooling on economic activity and the way in which the extent of unemployment does not markedly decrease with age,as proponents of the youth unemployment crisis would have us believe. Overall the youth unemployment ratio is 9.7% (making the UK above average in the EU at 12.4%) compared to the usually quoted ‘rate’ of 23%. And the often referred to Greek youth unemployment rate of over 50% falls to 16%. In countries like Germany,Netherlands and Austria it falls from around 8% to 4%! Clearly,youth unemployment is an issue that can be beaten,even if that is not (yet) the case in the UK.

Youth unemployment in the UK and elsewhere is a serious issue deserving of great attention. But it’s overestimation,misreporting,misinterpretation and misuse leads to an excessive policy and resource focus,inappropriate policy responses and an over concentration on it relative to other dimensions of unemployment. Indeed,it tends to over emphasize the importance of unemployment per se relative to other less well known but as important labour market issues like precarious employment, under employment,low pay and long term unemployment,some of which in particular affect young people. But that is a story for another day.

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6 thoughts on “One in Five of our Young People are Unemployed? I don’t think so!”

.96/4.5 is not equal to .122. Thoroughly spurious argument. why not look at numbers of employed youth relative to population growth and see if these numbers have increased, has the economy created enough jobs in this age bracket to keep up with population growth, or has this number shrunk. Then you might have an argumnent to fiddle with the denominator and the numerator. But you have not done this here.

Hi Ben
I really cannot see what is spurious, i.e. invalid, in my arguments and evidence.You just assert this but do not say what or why.Yes,.96/4.5 is not .122,it is .205: that is why the usual measured rate is given as 20.5%. The actual proportion of young people unemployed is 12.2% as I say i.e as you would put it,.96/7.7 equals .122).Moreover your population growth point is not relevant as it confuses stocks (the level of employment/unemployment) and flows (the growth/decline/change in employment/unemployment). I do not consider whether youth unemployment is rising or falling in my article at all (in fact it is now falling after earlier periods of falling and then rising,depending on the time scale chosen). The point I make is that the measured level of youth unemployment is overestimated,misreported and misinterpreted. Which part of my argument and evidence do you disagree with and why?
Mike

hi Mike,
I just took issue with the how you have represented youth unemployment because there are 50% of Spanish youth that cannot find a job. The way the stats are composed that means 50% of all youth that want a job cannot get a job. If you include those that are not active in the definition of the labour market you are doing a disservice to those who are looking for work and cannot find it. If those who are economically inactive suddenly became active you would have to add those numbers to the numerator and the denominator. If you did that you would find that unemployment would actually rise. I think it is disingenuous to treat the denominator like you do because youth choose to stay in education. The fact of the matter is the economy is not creating enough employment to absorb half the youth that want to work (in spain). If all of the youth tomorrow decided they wanted to work the unemployment rate would be even higher, because as you realise, there just aren’t enough jobs.

If you look at hidden unemployment you find the same thing occurring as the participation rate falls. If the participation rate in advanced western economies remained at its peak unemployment would be at least 2-3 percentage points higher.

Ben Thanks for taking the time to explain further,much appreciated. But you still run counter to my basic point in your first few lines and again later: It is NOT true that 50% of Spanish youth cannot find a job,that is my point. To say what this % actually is,you need the youth unemployment ‘ratio’ that I referred to in my article and that is around 20%. This is because youth unemployment ‘rates’only refer to those who are economically active….and excludes all those in full time education ie the bulk of those who are economically inactive. Youth unemployment is a serious problem,but it is not helpful to overestimate it and misuse data,not least because it has a negative impact on other employment issues and disadvantaged groups. And ,yes.I agree the real problem is a demand side problem of the volume ,quality and location of jobs. That is what we should focus on. Best Wishes Mike

Professor Mike Campbell OBE: Economic, labour market and skills analyst working in the UK and internationally. Visiting Professor at Durham Business School. Programme Advisor to the Joseph Rowntree Foundation on cities, growth, and poverty.